Nuclear still cost competitive in Japan, study says

02 September 2011

The costs of generating electricity using nuclear power plants in Japan, even taking into account the compensation costs related to the Fukushima Daiichi accident, still remain likely to be less than using fossil fuels, according to a new study.

The Institute of Energy Economic of Japan (IEEJ) says that for the past five years the cost of nuclear generation remained stable at around ¥7.00 ($0.09) per kilowatt-hour (kWh). However, even if compensation of up to ¥10 trillion ($130 billion) for loss or damage from a nuclear accident is taken into account, the cost of electricity generation with nuclear reactors increases to some ¥8.50 ($0.11) per kWh.

According to the IEEJ, the cost of generating electricity from fossil fuels over the past five years averaged ¥10.20 ($0.13) per kWh, while the costs from renewable energy sources (mostly geothermal) averaged ¥8.90 ($0.12). However, the study says that the cost of fossil fuel generation, unlike that for nuclear generation, varied widely over the period -from ¥9 to ¥12 ($0.12 to $0.16) - due to fluctuations in the costs of importing the fuel.

IEEJ based its calculations of financial reports published by 12 Japanese power utilities over the past five years, but prior to the March 2011 earthquake and tsunami. The study includes the costs of decommissioning existing reactors, but does not include spending on research and development or payments to communities hosting nuclear power plants.

Japan has few natural resources of its own, so depends on imports for some 84% of its primary energy needs and relies on its 50 or so nuclear power reactors to generate some 30% of its electricity. A significant expansion in the use of nuclear energy - to more than 50% in 2030 - had been proposed under the country's basic energy plan.

This expansion in nuclear generation had been based on cost estimates made in 2004 by a government sub-committee. At that time, the cost of nuclear generation was put at ¥5.30 ($0.07) per kWh, by far the cheapest means of generating electricity, with oil at ¥10.70 ($0.14), coal at ¥5.70 ($0.07), gas at ¥6.20 ($0.08) and hydro at ¥11.90 ($0.16).

Former prime minister Naoto Kan was quick to announce a fundamental review of energy policy within days of the Fukushima accident. He said at the time that nuclear power would remain as one pillar of the energy system, along with fossil fuels. His idea was to add one pillar of renewable energy and another of efficiency to control demand. He had spoken of his personal ideal of a future Japan that did not use nuclear energy.

Kan’s successor, Yoshihiko Noda, took over power today. He has never publicly concurred with Kan’s view of nuclear energy, but has called for the strong, independent regulation of the industry and a reduction of the country’s dependence on nuclear. Noda supports the restart of Japan's halted reactors. Currently, only 12 of the country’s 54 power reactors are in operation.